Risks to the continuation of the New Mexico International Airport (NAIM) project are rising after Mexican President-elect Andres Manuel Lopez Obrador (AMLO) announced plans in August to hold a national vote in October 2018 on the future of the USD13bn project, which AMLO criticized repeatedly while a candidate. According to AMLO's announcement, voters will be given the option to choose between the continued development of the NAIM project, currently about 30% complete according to government sources, and its cancellation in favour of an alternative proposal advanced by AMLO. That proposal would involve the construction of two new runways and a terminal building at the Santa Lucia military base north of Mexico City as well as the continued use of existing Benito Juarez International Airport, which under current plans will be closed due to technical incompatibility with the NAIM.

While in line with our view that the outright cancellation of the NAIM project was unlikely ( see 'Airport Cancellation Unlikely', 30 May 2018), the proposed national vote could nonetheless risk the same result by different means. The level of risk posed by the vote will depend on the exact wording of the questions posed to voters as well as the mechanism used to hold the vote, points which have not yet been clarified. In particular, the level of flexibility left to the government to change policy later will be critical, given that the feasibility of operating an expanded airport at Santa Lucia and the Benito Juarez International Airport at the same time remains unclear pending further technical studies.

By increasing the risk of the NAIM being cancelled, the proposed national vote poses substantial downside risk to our forecasts for Mexico's construction industry. The NAIM is one of the largest infrastructure projects currently being developed in Latin America and, with the majority of work still unfinished, the project if continued will see substantial investment over the next several years. In contrast, the Santa Lucia project would involve a much smaller investment, requiring an estimated USD3.7bn compared to at least USD8bn still required to complete the NAIM project. In addition, with technical studies still required to verify the feasibility of the Santa Lucia project, construction on the project would not begin until 2019 or 2020 at the earliest, meaning substantial downside risk to our construction industry growth forecast for 2019 and potentially 2020 as well.

The willingness of the government to use a public vote to decide the future of a major infrastructure project that is already substantially underway risks shaking investor confidence in the Mexican infrastructure market more broadly, deterring involvement in future projects. A number of the largest domestic and international firms in Mexico's infrastructure sector are actively involved in the NAIM project as contractors, including Operadora Cicsa, Constructora y Edificadora GIA +A, ICA Constructora de Infraestructura, FCC Industrial e Infraestructuras Energeticas, Pensinsular Compania Constructora, Acciona Infraestructura Mexico and Promotora y Desarrolladora Mexicana. These and other firms may be less willing to risk involvement in future infrastructure project tenders given a heightened sense of infrastructure policy uncertainty. The cancellation of the NAIM would also likely lead to large-scale legal action against the government, further worsening investor sentiment towards the market.